Cladek released on $5 million signature bond

JACKSONVILLE -- A St. Augustine Beach businesswoman charged with defrauding 1,300 investors out of $113 million was released from federal custody Tuesday after signing a $5 million bond guarantee that is guaranteed only by her signature.

Just a few of Lydia I. Cladek's alleged victims attended the half-hour hearing to finalize the conditions of her pretrial release from jail.

No one was surprised and no one was pleased with the decision by U.S. Magistrate Judge Thomas E. Morris.

"I deeply regret that the court has allowed this fraud, this criminal, this person who has lied straight-faced to her lifelong friends, close family members, relatives, business partners and investors to go free on basically her own recognizance. ..." said Michael Egelman, a member of the board of the reorganized company.

Morris said he understood that many of the alleged victims wished for Cladek to remain in jail until her trial starts on Jan. 27.

However, he added, only those defendants charged with violence or drug-related crimes may be denied bond.

The office of U.S. Pretrial Services is "satisfied with the arrangements" with the unnamed third-party custodian who will be responsible for making sure Cladek abides by the conditions of her release, the judge said.

Pretrial Services is also satisfied with the unnamed location where Cladek will stay under house arrest until her trial begins, Morris added.

The defendant reportedly has been held at a federal holding facility in the Baker County jail. The judge ordered her released as soon as she was given civilian clothes and had an electronic monitor placed on her leg.

The Department of Justice and the FBI announced Nov. 23 that Cladek had been indicted on 14 counts of wire and mail fraud and conspiracy to commit wire and mail fraud.

She was arrested that day at her apartment on Fort Myers Beach. She was held in federal custody there until she was brought to Jacksonville for her Dec. 9 arraignment.

Cladek faces 20 years in federal prison on each count and a $3.5 million fine.

Indictment

According to the indictment, Cladek was the president and sole shareholder of Lydia Cladek Inc. (LCI), an investment company with an office at the Sea Grove Town Center in St. Augustine Beach.

The business bought consumer finance contracts from various auto dealers at a discount, as low as 60 percent of the contract price.

Consumers paid up to 29.5 percent on their contracts. Investors were receiving up to 18 percent for the money they put in to buy the discounted notes.

According to the indictment, Cladek used investors' money to support her lifestyle, to acquire property and to repay other investors to conceal her fraudulent use of the funds.

The government is seeking more than $113 million that Cladek is charged with taking from her investors. Prosecutors also will ask that Cladek forfeit certain assets that allegedly were bought with proceeds from her scheme.

Those assets include oceanfront property in St. Augustine Beach, jewelry and artwork.

LCI has been reorganized and is being operated as Integrity Finance Corp. in an attempt to provide investors with a bigger return on their money than they expected to get in a bankruptcy filing.

LaFleur Law Firm

At one point after Cladek's arrest, the La Fleur Law Firm of St. Augustine represented 56 of those investors.

The firm resigned from representation of the Unsecured Creditors Committee in February, said Nina M. LaFleur, who has more than 20 years of bankruptcy experience.

The reason LaFleur gave was the committee's intention to "continue (Cladek's) Ponzi scheme" by reforming her company.

"Confirmation of the committee's plan, which continues this Ponzi scheme business, does not help my clients and, in reality, continues to hurt them," LaFleur said shortly before Cladek's Tuesday court appearance.

"The potential release of Lydia Cladek on bond, pending the criminal trial by the United States Department of Justice, only makes the pain worse," she added.

Only a handful of spectators attended Tuesday's hearing, which lasted maybe half an hour.

Bitter

The few who spoke at Tuesday's hearing were bitter.

"There are many of those people, investors, that she totally crushed," said Elaine Coats, of Flagler Beach. "She almost snuffed their lives out.

"The shock of justice ... that she could walk out of here on a signature bond."

Her husband, Sam, agreed wholeheartedly.

"This lady [Cladek] has deceived everyone she has come in contact with," he said. "I know she has rights. But the people she defrauded have rights, also.

"To this day, I don't think we know where all the money is."

Michael Egelman didn't mince words as he urged the judge to keep Cladek in custody.

"I and others I have spoken with believe that this person -- without conscience, a sociopath, a liar, a fraud and criminal -- is in fact a flight risk and will do anything, anything to avoid the consequences of her years of criminal behavior," he said.

"This person would not leave herself without funds," Egelman added, echoing the opinion of Sam and Elaine Coats. "Although the FBI has not accounted for all she spent and hid does not mean that she has no money available to her."

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Restrictions on Lydia Cladek

* Cladek will have to wear an ankle monitor at all times and not leave the home unless she has permission from the court.

The only exceptions will be to attend sessions of church and women's groups, court appearances, consultation with attorneys or for emergency medical reasons.

The third-party custodian will have to accompany Cladek when she leaves the residence for any reason.

* No employment without permission from the court.

* No investment activity of any kind.

* No soliciting funds for any cause.

* No contact with former or current employees, creditors or debtors of LCI.